Panel #4 The Political Economy of State-Business Relations

Panel Abstract: This panel explores the changing relationship between local governments and firms before and after the start of the Xi Jinping administration. While the Xi administration has reduced local governments’ room for maneuver, local political interests still shape and distort governance. The papers reveal how local politics systematically shape effective corporate tax rates, allocation of firm subsidies, local protectionism in the courts, and, finally, handling of public interest environmental litigation against local polluters. The papers that make up this panel apply rigorous analyses to an impressive array of datasets to explore the regulatory capacity of the local Chinese state in a rapidly changing political economy. Chen et al. employ panel data covering more than 700,000 firms to explain the counterintuitive finding that firms with more mobile capital pay higher effective tax rates, although that relationship has been moderated since the start of Xi Jinping’s anti-corruption campaign. Hou et al. combine firm-level and political appointment data to demonstrate that new provincial governors favor SOEs relative to private firms in the allocation of subsidies at the start of their terms, enhancing their own promotion prospects. Li et al. collect original litigation data for all publicly listed firms in China to assess the effect of recent court reforms, which reduced local protectionism; they show that local firms were less likely to win their cases but that enforcement of rulings against local firms was weaker. Liu et al. employ a dataset of city-level environmental investigation disclosures to measure the effect of new forms of public interest litigation. Litigation reduces disclosures in the following year, and those investigations disclosed tend to involve lower-profile cases. The authors conclude that local officials comply with policy but manipulate disclosure to avoid public monitoring.

Chair: Susan WHITING (University of Washington)

Discussant: Yuen Yuen ANG (University of Michigan)

Discussant: Iza DING (University of Pittsburgh)

• Capital Mobility & Taxation in Non-OECD Countries: Evidence from China

Ling CHEN (Johns Hopkins SAIS) and Florian HOLLENBACH (Texas A&M University)

• Local Leadership Turnover and Firm Subsidies in China

Yue HOU (University of Pennsylvania) and Siyao LI (University of Pennsylvania)

• The Authoritarian Rule of Law through Centralization: Evidence from China

Yishuang LI (New York University) and Zhenhuan LEI (University of Wisconsin-Madison)

• Resisting Public Monitoring in Autocracies: Evidence from China

Dongshu LIU (City University of Hong Kong), Xiao ZHU (Renmin University of China), and Taotao QIU (Renmin University of China)

Please note that the 2021 APSA Chinese Politics Mini-Conference has an adjusted schedule and moved to Zoom. APSA registrants are welcomed to attend. We will also project Zoom from the APSA conference room (Conference Center, Tahoma 4). For more information, see schedule and virtual plan on the website menu.)